Posted on 10/25/2014 8:35:33 AM PDT by Kaslin
Against the interests of Michiganders, Governor Rick Snyder has signed a bill banning Tesla Motor’s direct-to-consumer automobile sales in the state.
The original focus of House Bill 5606 was on determining how franchise-dealership fees are charged. Then, right before the vote, an amendment banning automobile sales directly to consumers was added by State Senator Joe Hune. This backhanded maneuver shielded the amendment from public comment and debate.
Passed unanimously in the State Senate and with only one dissenting vote in the House, the “anti-Tesla bill” is an economic loss for Michigan. The state will miss out on tax revenue from sales of expensive Teslas (which can sell for over $100,000), but the negative consequences extend much further and speak to the widespread problem of special interests controlling politicians.
Unlike other car manufacturers, Tesla sells its vehicles directly to consumers in Apple-like retail locations without dealerships, outside salesmen, and price negotiations. Tesla is free to completely own the branding and ensure customer experiences meet its standards. This bypasses dealerships and their supporters such as the Big Three automakers who are, unfortunately, powerful political players.
The rationale for forcing people to buy cars at dealerships is not public safety. It is protecting favored industries that have contributed significant sums of money to politicians across the nation—especially in Michigan.
Governor Snyder has received more than $175,000 this election cycle from automotive companies. Is it any wonder that General Motors and Ford both said in statements that they “applaud” Governor Snyder’s decision. The Michigan Auto Dealers Association has been a long-time backer of Hune, and his wife is a lobbyist for auto dealers. While Snyder is calling for the legislature to eventually debate the merits of requiring automobile sales through dealers, if the results of the vote on HB 5606 are any indication, the Big Three and Michigan dealers have no reason to worry—they already have the legislature in their pockets.
The influence of these groups extends far beyond Michigan. The National Auto Dealers Association has spent $2 million on federal candidates during the current cycle. General Motors, Ford Motor Company, and Chrysler have spent a combined $34 million on federal lobbying and political contributions in the 2014 election cycle. Alternatively, Tesla has only spent $8,600.
The policies favored by automobile makers and dealerships raise prices for consumers. A Department of Justice report found that dealerships raise the cost of new vehicles, and advocates eliminating them. The report estimates that the cost of the current distribution system accounts for 30 percent of the vehicle price—and half of this increase is directly from dealerships.
The dealership model does have some benefits, such as flexible prices based on low financing rates. Dealerships also offer places for customers to service their vehicles. However, if dealerships benefit customers, why is it necessary to ban other manufacturers from using direct sales? If all consumers were truly benefitting, there would be no need to force everyone to shop at dealerships.
Technological advances are making direct order and delivery of automobiles economically feasible and appealing to certain buyers. Automobile companies that choose to sell directly to the public can also offer maintenance centers or direct their customers to qualified mechanics.
In other states that ban Tesla’s direct sales to customers the company still is free to offer “galleries” which do not sell vehicles, but let consumers learn about cars. Michigan is going a step further and banning informational galleries as well, so Tesla is not even free to talk to people about its cars. Apparently some hold entrenched business interests in higher esteem than free speech.
Consumers have very different preferences and reasons for purchasing vehicles, so one-size-fits-all systems make for poor policy. The market offers a variety of options for purchasing other consumer goods. Customers can choose from shopping directly with the manufacturer, visiting physical retail stores, or browsing online. Imagine if you could buy your next car on Amazon. The convenience and simplicity would appeal to many consumers who dislike the negotiating process and lengthy encounters with car salesmen.
Meeting the needs of diverse consumers requires retailers that are similarly diverse. Eliminating harmless transactions between consenting adults only strips consumers of choice and is detrimental to the interests of all involved—except entrenched competitors. When freedom of entry is limited, consumers lose.
The plant outside of Reno is the first Tesla battery factory.
There will be a need for many.
Not just for cars but energy storage/management.
I would think there would be many enterprising Michigan citizens that can open a mail drop store front as a Tesla distributor/dealer.
A web domain, web site, a phone number with an answering device and an e mail address to the Mich-tesla.com domain and zap...... you’re in business
I don't think it is legal to prevent a franchisee from also being a franchisee of another manufacturer. I'm sure Ford would love to prevent their franchisees from also being Toyota franchisees. However, at least here in Texas, it is common to see one dealer owning dealerships from several different competing manufacturers.
“Oh goodie. The Tesla sales liar has arrived.” -cripplecreek
I see you are back to accusing those you disagree with of being shills when you don't have a cogent response to their argument. Ironically, I have never had any connections to a dealer or the car industry whereas you admit that you used to work for a dealer.
I think people should look at your posting history before considering anything you say.
I already know you’re a lying scumbag and was hoping you would pull your head out of your ass far enough to figure out that posting to me was pointless but you’re apparently in pretty deep.
True enough, there’s nothing preventing anyone from opening a franchise of their own.
“Anybody know why this is?”
Don’t know the details, but money is probably involved.
I was just about to say, anyone who looks at my posting history can see that I am a supporter of electric vehicles in general, not just Tesla. In fact I was disappointed when Elon Musk was critical of some of the competing EVs out there. But I guess that is his job.
“I already know you’re a lying scumbag and was hoping you would pull your head out of your ass far enough to figure out that posting to me was pointless but you’re apparently in pretty deep.”
Wow man, you need to take a deep breath. Would you like explain how exactly I have lied or are you just going to make blanket accusations and continue to avoid addressing the points I've made?
“First, more on the short answer: Yes, Musk could easily work with franchise owners if he really wanted to. But if you're a manufacturer, you cede a lot of control to the dealership when you hand over your cars. As anyone who's haggled for a car knows, dealers have a lot of power to set prices. They can give customers a bad experience — causing folks to walk away, vowing never to buy a Volkswagen or a Toyota again.
‘Our stores are as much education venues as retail venues — in fact, probably more so,’ said Diarmuid O’Connell, Tesla's vice president of business development, in an interview Wednesday. ‘We don't think that we would succeed using an intermediary model where we sell a product that someone else sells to the public.’”
There is a cottage industry trying to get accurate numbers for total Tesla sales. 26 thousand last I checked. A dealership (Toyota) I worked for sold 5500 a year. It was one of 6 in the Denver area at the time.
In the world of car makers Tesla is puny.
I can see another problem for the dealers and independent mechanics in the future. An electrical engine is so simple and durable that the car owner will only need to replace the tires and brakes every say-50K miles and replace the battery every 5 years or more. The battery is where the technical break through has to happen.
Tesla aside, corporate-owned outlets for everything is the seemingly inevitable capitalist outcome.
With auto dealers of all kinds, there’s just not as much profit in it as there used to be, so the outlets end up in the hands of the deepest pockets.
I still think Musk is just trying to keep hidden how little actual profit there is in his vehicles.
Bingo. I hear all the time that dealers make more money off of their service centers than on sales nowadays. Dealers generally have little interest in selling electric cars. I test drove a Chevy Volt a while ago (although it is electric and gas, you don't use the gas very often) and I spent the entire test drive teaching the salesman about the car.
“...and replace the battery every 5 years or more. The battery is where the technical break through has to happen.”
The definitely need to have some breakthroughs to bring the price down, but after being on the market for four years, Chevy Volts at least have shown to have virtually no reduction in battery capacity. The Volt has some pretty advanced battery cooling and charge management though. I'm not as familiar with how other electric cars have fared.
There trying to do it here in NJ.
I don't think having franchised dealers would change that. Ultimately dealers are just middlemen, buying the car from the manufacturer for X price and selling it for Y price. They don't get into the inner workings of the price the manufacturer charges them.
Their.
In the world of car makers Tesla is puny.
...
It’s puny, but it sure makes the news. People seem to love the cars and they have a terrific growth rate.
Giving dealers a cut would move it from Mercedes - Lexus - BMW competitors to the Maserati - Bentley - Aston-Martin range, a much smaller market.
Dealer sales are monitored a lot more closely than Tesla sales are now.
Worst case of mold I’ve ever seen.
Must’ve left it out in the rain.
Probably from Seattle.
This will create a real hardship for people who can shell out over $100K for a car. There’s no way they’ll be able to buy one now. /s
Townhall has become a haven for snarky Democrats in all but name.
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